Mobile

Why Apple's iBeacon Hasn't Taken Off—Yet

Hillshire Brands (HSH) sees the promise of Apple’s (AAPL) iBeacon, software that’s been embedded in iOS 7 for a year. With iBeacon, Hillshire can track a shopper wheeling through a grocery store and send his iPhone a coupon or an ad for sausages just as he approaches the right cooler. Hillshire says consumers in 10 U.S. test cities who received iBeacon messages via apps such as recipe service Epicurious have been 20 times likelier to buy its American Craft sausages. Last year, iBeacon promised Apple a new wave of consumer data and looked like a boon to retailers and advertisers trying to reverse a decline in impulse buys. Using a low-energy Bluetooth signal, the software makes an iPhone’s proximity to certain items easier to track with the help of $10 signaling devices—beacons—mounted on shelves and ceilings, each no bigger than a hockey puck.

Photograph by Apple via AP PhotoIPhone using Apple’s iBeacon

For the most part, however, stores have yet to embrace Apple’s technology. “Retailers are just putting their toes in,” says Owen Geddes, chief executive officer of startup Appflare, which sets up iBeacon networks for merchants. He says there have been a lot of announcements by retailers that they are trying out iBeacon networks in a handful of locations, “but the reality is, very few of them have been deployed.” Less than 1 percent of the 3.6 million retail stores in the U.S. make use of iBeacon, says Mark Hung, an analyst at market researcher Gartner (IT). Apple declined to comment for this story.

The main obstacle for retailers is that iBeacon doesn’t quite do everything by itself. Shoppers need to have apps such as Epicurious or discount service Shopkick that have incorporated the tracking technology. Many consumers don’t consult shopping aids while they’re in the store, and, says Adam Silverman, an analyst at Forrester Research (FORR), “Those apps are gimmicky.” He adds, “The retailers haven’t yet deciphered what customers want.”

Another factor: Apple’s design wasn’t the first indoor location-tracking system available. Many businesses are experimenting with other technologies, including Motorola Solutions (MSI) and Datzing beacons that use both Bluetooth and Wi-Fi signals. “I wouldn’t say it’s a clear winner at all,” Derek Top, an analyst at Opus Research, says of iBeacon. Shopkick is among the startups that combine Apple’s system with their own ultrasound technology to increase its accuracy.

Although Apple has a lot of big names using iBeacon, most, like Hillshire, are just testing it. Macy’s (M) has set up beacons in two stores that push product recommendations and discounts to Shopkick users; Lord & Taylor (HBC:CN) is doing the same in 10 stores with coupon app SnipSnap. Starwood Hotels & Resorts (HOT) is trying out iBeacon in 30 hotels to help concierges greet arrivals by name. Clay Cowan, a vice president at Starwood, says the service may also help accelerate check-in for frequent guests or inform housekeeping when a room is occupied.

IBeacon’s biggest convert so far is Major League Baseball, which put beacons in 28 of 30 ballparks. Bill Schlough, the chief information officer for the San Francisco Giants, says check-ins by fans using the MLB’s ballpark app more than doubled this season after the app began using iBeacon to help push merchandise coupons and seat upgrades. “For us, that’s a success,” he says. The MLB app is now adding short, location-specific videos on the history of stadiums.

Some barriers to iBeacon adoption are falling away. Google (GOOG) has built more iBeacon functionality into the latest versions of Android. GE Lighting (GE) has formed a partnership with startup ByteLight to develop lightbulbs that can also help track shoppers via iBeacon, which would eliminate the need for retailers to buy separate hardware. More companies are curious. “We have half of Fortune 500 developing with us,” says Steve Cheney, a senior vice president at startup Estimote, which designs hardware and software to work with iBeacon. There is just one major group of holdouts to persuade: shoppers.